Ann: Fully Underwritten Entitlement Offer to Raise up to $1.74m, page-85

Straight copy and paste from Next Investor's email:

1		Thompson Resources (ASX: TMZ) After a series of unfortunate eventsThompson Resources (ASX:TMZ)announced a rights issue offered to all existing TMZ shareholders at a whopping 87.5% discount to the company’s last traded price. At the same time, TMZ’s CEO David Williams resigned for personal reasons. TMZ has been a very poor performer, even by small cap standards. When things go wrong with most small caps, the share price may fall 40% to 50%, and have the chance to rebound by delivering some successful progress or finding a new project, allowing investors to recover some paper losses. TMZ, however, is down 93% from our Initial Entry Price, so it's going to be a tough grind to get back to where we started. We have held TMZ for over two years. While we Top Sliced ~12% of our position during that time, we held ~88% of the position all the way down to where it is today - not our proudest small cap Investment story. But we are planning to take up our full rights issue (which is being offered to all TMZ shareholders) and also apply for any shortfall. Because after so much has gone wrong and the share price has performed so badly, it’s likely there will be a new plan and management appointed to try and soothe the pain for existing holders. TMZ is currently trading at a lowly M market cap. Here is what we think went wrong with TMZ… Our Big Bet was that ‘TMZ becomes a silver producer by first proving up a large enough silver equivalent resource base that makes its "hub and spoke" development strategy feasible and then by feeding these resources through its centralised processing facility’. While TMZ was developing its hub and spoke model the silver price never took off and funding for the business dried up before the company had the opportunity to prove up its targeted 100 million oz. silver equivalent resource. With access to capital being sparse for small cap companies, TMZ turned to the risky strategy of funding the business through a convertible note that could be converted to shares, which we think contributed to the downward spiral in the company’s share price and eventually the heavily discounted rights issue announced last week. You can read more about funding risk from convertible note funding in this weekend edition: “Whoever has the gold makes the rules”. This was one of the key risks we mentioned in our TMZ Investment Memo and unfortunately it led to the company’s share price moving sharply lower last week.

One risk we did NOT foresee was a big seller in TMZ. When we first Invested, ASX listed “Silver Mines Limited” was a major shareholder of TMZ with 15.5%. Silver Mines Limited unexpectedly started to progressively sell down its holding into the market and added to the downward share price spiral - their most recent substantial holder notice in 2022 showed their position had dwindled to ~7.9%. We originally thought having a larger silver company on the share register was a good thing, we did not expect them to start selling into the market. We have now learned to treat a large corporate holding as a potential risk as well as a potential positive. We still maintain a position in TMZ, and will take up our entitlement under the rights issue in the hopes that the company can pull a rabbit out of the hat with a new acquisition or some progress on their existing assets BUT the company is no longer a core Portfolio holding for now. We will wait to see what they do next before we consider whether to bring them back into the core Portfolio. After this news we have decided to move TMZ to our “Bottom Drawer Portfolio”.